Stocks slump over 2%; ASPI ends below 6,000 mark

The indices at the Colombo Stock Exchange (CSE) recorded a sharp decline yesterday amid the unsettled global politics, though the local stock market analysts termed it “bit of an overreaction”.

Iran yesterday attacked the Iraqi bases housing the US troops in retaliation for the killing of a top Iranian General.

A possible escalation of tensions between the US and Iran could spell doom to Sri Lanka’s tea exports to Iran and a steep hike in crude oil prices could widen the country’s trade deficit.
The benchmark All Share Price Index (ASPI) yesterday plunged below the psychological 6,000 mark, losing 2.11 percent or 127.25 points to close at 5,898.84 while the more liquid S&P SL20 index fell 2.64 percent or 75.54 points to 2,782.45.

“The market plunge appears to be bit of an overreaction to the global developments,” First Capital Head of Research Dimantha Mathew said.

No crossings were recorded for the day and the turnover was Rs.624.4 million.

Banks, finance and insurance sector was the highest contributor towards the turnover, followed by the diversified and manufacturing sectors. 

The foreign investors became the net sellers of Rs.2.4 million worth of shares, while their participation in terms of turnover increased marginally to 9.7 percent, compared to the previous day’s 7.2 percent. 

Asia Securities said the estimated net foreign buying topped in Dialog Axiata PLC and Ceylon Cold Stores PLC.

Retail activity was witnessed in counters such as Access Engineering, Browns Investments and LOLC Holdings. 

Oil spikes after Iran attacks US forces

Hong Kong (AFP): Asian markets pared their morning losses and oil prices came down slightly from their earlier gains after Iran said it had “concluded” for now its missile attacks on US targets in Iraq following the killing of its top general.

Tehran said it had halted its reprisal over commander Qasem Soleimani after it targeted US forces in Iraq with a missile strike, with Foreign Minister Mohammad Javad Zarif tweeting that the country does “not seek escalation or war”.

The Pentagon said it was still “working on initial battle damage assessments” after bases at Ain al-Asad and Arbil in Iraq -- which house US and coalition forces -- 

were targeted by more than a dozen ballistic missiles.

There were no immediate reports on casualties. US President Donald Trump said the assessment was underway but added on Twitter: “So far, so good”.

Further instability came after a Ukrainian Boeing 737 had crashed shortly after taking off from the Tehran airport, killing at least 170 people.

West Texas Intermediate and Brent Crude later pared their gains. At around 0700 GMT WTI sat at US $ 63.20 up 0.80 percent and Brent was at US $ 68.93, 0.97 percent up.
Oil markets have been unsettled since Friday’s killing in a US drone strike of Iranian general Qasem Soleimani, one of the most important figures in the country’s government.
The assassination sparked an outpouring of rage and grief in Iran, along with a growing drumbeat of threats of revenge and warnings of a possible war that could engulf much of the Middle East.

Safe haven assets also rose yesterday as investors dumped stocks and headed to the hills.

Gold was up more than two percent, surging above US $ 1,600 an ounce for the first time in six years, before falling back slightly.

Analyst Stephen Innes, chief Asia market strategist at AxiTrader, noted that a further escalation is likely to attract more safe-haven flows to gold.

He cautioned that “surges in geopolitical risk can, by their nature, be short-lived and volatile.”

“Still, it’s tough not to get encapsulated by the heat of the moment when it comes to the fog of war,” he said.

The Japanese yen, where investors traditionally take refuge in times of uncertainty, was also up, adding fuel to the fire in Tokyo, where the Nikkei 225 index fell 1.57 percent to 23,204.76 at the close of the day, while the broader Topic index went down 1.37 percent to 1,701.40.

“Though we’ll see the market react to the latest strike today, we don’t see that as a long-term risk-off theme,” said Chen Haoyang, a Managing Director at Shanghai Leader Capital Co.
However, a possible market rout faded as Asian bourses got going in earnest, with early declines slowing.

By around 0700 GMT, Sydney was down 0.43 percent and Shanghai’s main index had lost 1.22 percent or 37.91 points, to close at 3,066.89.

In Tuesday trade, US stocks had finished slightly lower while European markets were broadly flat -- Frankfurt outperforming its peers with a 0.8-percent gain.